Soaring prices push economies to tipping point

By Lesley Wroughton

WASHINGTON (Reuters) - Surging food and fuel prices have pushed some countries to a "tipping point," the head of the International Monetary Fund warned on Tuesday, threatening hard-won efforts in many African countries to stabilize their economies.

"If food prices rise further and oil prices just stay the same, then some governments will be unable to feed people and at the same time maintain stability in their economy," said Dominique Strauss-Kahn, managing director of the IMF.

"They need good policy options and they need help from the international community," he told a conference to discuss new IMF research on food and fuel inflation.

The problem is especially severe in some Sub-Saharan African countries and threatens to wipe out gains made over the past decade to reduce poverty and strengthen their economies. It also risks driving up the debts of poor countries as governments increase borrowing to deal with the higher prices.

The IMF has identified 18 countries in sub-Saharan Africa that have been hard-hit by higher prices that will need balance of payments and budget support.

Among these is Liberia, a West African country that has slowly emerged from years of civil war, where the impact of higher oil prices on the balance of payments is around 15 percent of GDP, representing nearly all of its international reserves.

Strauss-Kahn said the IMF research underscored the need for a coordinated response by countries, donors and international organizations to tackle the effects of the global price shock.

"Each country is different and exact policy prescriptions will vary considerably. But the universal challenge for all poor and middle-income countries is to find ways to feed the hungry while maintaining hard-won macroeconomic stability," he said.